Malawi: Drought Insurance ‘An Experiment That Failed’ in Malawi – Report.
London — A policy taken out by Malawi cost the country $5 million but failed to deliver timely assistance to more than 6.5 million people affected by drought in 2016, says ActionAid Taking out insurance to protect against climate risks is the "wrong model" for improving countries’ ability to cope and may even be worsening inequality and vulnerability, a leading development charity said on Wednesday.
A policy taken out by Malawi cost the drought-ridden southern African country $5 million but failed to deliver timely assistance to more than 6.5 million people affected in 2016 and shows that insurance is "poor value for money", ActionAid said.
ActionAid said in a report there had been major defects in the model, data and process used by insurers African Risk Capacity Insurance Company Limited (ARC Ltd) to determine a payout to Malawi.
"Insurance is not a quick fix for broken development, adaptation and humanitarian finance systems," Jonathan Reeves, the report’s author, said in a statement.
Malawi took out insurance based on a crop – long-cycle maize – that, as it turned out, most farmers did not grow in the 2015/2016 season.
After investigating the discrepancy, ARC Ltd made a payment of $8.1 million to Malawi in January 2017, which ActionAid deemed "too little, too late".
The total cost of responding to the drought cost Malawi, where more than 80 percent of the population are smallholder farmers, an estimated $395 million, according to the report.
Now, drought in the continent’s east is pushing millions into hunger.
Insurance can be triggered more quickly than international aid, which can take months to fund.